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Corporate Structuring & Entities

What's on this page

  • Core content for this topic in the Inkorporated enterprise OS.
  • Practical guidance, roles, or standards as applicable.

What this enables

  • Consistent enterprise operations and decision-making.
  • Shared language for humans and cyborg AI agents.

This document defines the legal entity structure of Inkorporated, explaining when and why we use specific structures like C-Corps, LLCs, and Subsidiaries.

1. Top-Level Structure: Delaware C-Corp

The parent company is incorporated as a Delaware C-Corporation.

Why Delaware?

  • Legal Precedent: The Court of Chancery provides predictable, business-savvy legal rulings.
  • Investor Preference: VCs and institutional investors almost exclusively invest in Delaware C-Corps.
  • Efficiency: Administrative filings and corporate governance are streamlined.

Why C-Corp?

  • Stock Options: C-Corps allow for the issuance of Incentive Stock Options (ISOs) and Qualified Small Business Stock (QSBS), which have significant tax advantages for employees and founders.
  • Separation: Distinct separation between ownership and management.

2. When to Use LLCs (Limited Liability Companies)

While the parent is a C-Corp, we utilize LLCs for specific subsidiary purposes where "pass-through" taxation or liability isolation is beneficial.

Use Cases for LLCs:

  • Asset Holding: Real estate or high-risk physical assets may be held in separate LLCs to protect the parent company's core IP from liability claims (e.g., a slip-and-fall lawsuit at a warehouse).
  • Joint Ventures: When partnering with another company for a specific project, an LLC allows for flexible profit-sharing agreements that differ from share ownership.
  • Special Purpose Vehicles (SPVs): For investment or specific acquisition activities.

When NOT to use LLCs:

  • Venture Capital: We do not raise venture capital into an LLC structure due to UBTI (Unrelated Business Taxable Income) issues for limited partners (LPs).

3. Subsidiary Strategy

We form wholly-owned subsidiaries for two primary reasons: International Operations and Regulatory Isolation.

International Expansion

  • Talent: To hire full-time employees in another country (e.g., UK, India, Canada), we must establish a local entity (e.g., Inkorporated UK Ltd).
  • Sales: To sell to enterprise customers in the EU, a local entity often simplifies VAT collection and contracting.

Transfer Pricing

Subsidiaries operate on an "Arm's Length" basis. The parent company (IP Owner) charges the subsidiary (Sales/R&D Service Provider) a fee. This ensures tax compliance in both jurisdictions.

4. Intellectual Property (IP) Strategy

All Intellectual Property is assigned to and held by the Parent Delaware C-Corp. * Invention Assignment Agreements: Every employee and contractor signs a PIIA (Proprietary Information and Inventions Assignment) vesting IP rights in the parent company immediately upon creation. * Intercompany Agreements: Subsidiaries do not own the code they write; they perform "R&D Services" for the parent company, which retains the IP.

5. Cap Table Management

  • Authorized Shares: The total number of shares the company can issue (requires Board/Shareholder approval to change).
  • Issued & Outstanding: Shares actually owned by founders, investors, and employees.
  • Option Pool: Shares reserved for future employee grants (typically 10-15% of fully diluted capitalization).